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Determinants of Foreign Ownership in Turkish Manufacturing

Author

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  • Ekrem Tatoglu
  • Keith W. Glaister
  • Fuat Erdal

Abstract

This study provides a comprehensive account of foreign investors' ownership strategies in the manufacturing sector in Turkey, drawing broadly on the framework of Dunning's eclectic theory and the transaction cost model of ownership. Unlike most of the prior research on equity ownership, which has been confined to a single source country, this study examines the ownership determinants of firms from numerous countries investing in a single host country. The study is based on a sample of 659 foreign affiliates of multinational enterprises with varying levels of foreign ownership. The study first examines the choice between a wholly owned subsidiary (WOS) and a joint venture (JV). The results show that cultural distance between the home country and the host country, the concentration ratio of the industry, diversification of parent-affiliate, capital size of affiliate, location of the affiliate, and, to some extent, the age of affiliate have the expected impact, supporting the study's hypotheses. However, the results concerning the impact of natural resource intensity of the target industry are contrary to expectations and contradict the findings of previous research. Next, the choice of equity level if the ownership structure is a JV is examined. The variables of cultural distance, diversification of parent-affiliate, and concentration ratio of Turkish industry entered prove relatively strong determinants of foreign ownership level. Little or no support is found for the impact of the age of the JV, the capital size of the JV, and the location of the JV on the foreign equity ownership level.

Suggested Citation

  • Ekrem Tatoglu & Keith W. Glaister & Fuat Erdal, 2003. "Determinants of Foreign Ownership in Turkish Manufacturing," Eastern European Economics, Taylor & Francis Journals, vol. 41(2), pages 5-41, March.
    • Handle: RePEc:mes:eaeuec:v:41:y:2003:i:2:p:5-41
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    Citations

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    Cited by:

    1. Demirbag, Mehmet & Tatoglu, Ekrem & Glaister, Keith W., 2009. "Equity-based entry modes of emerging country multinationals: Lessons from Turkey," Journal of World Business, Elsevier, vol. 44(4), pages 445-462, October.
    2. Demirbag, Mehmet & Glaister, Keith W. & Tatoglu, Ekrem, 2007. "Institutional and transaction cost influences on MNEs' ownership strategies of their affiliates: Evidence from an emerging market," Journal of World Business, Elsevier, vol. 42(4), pages 418-434, December.
    3. López-Duarte, Cristina & Vidal-Suárez, Marta M., 2013. "Cultural distance and the choice between wholly owned subsidiaries and joint ventures," Journal of Business Research, Elsevier, vol. 66(11), pages 2252-2261.
    4. Erdener Kaynak & Mehmet Demirbag & Ekrem Tatoglu, 2007. "Determinants of ownership-based entry mode choice of MNEs: Evidence from Mongolia," Management International Review, Springer, vol. 47(4), pages 505-530, October.
    5. Erkan Ilgün & Kasim Tatic, 2012. "Application Of Oli-Paradigm Of German Fdi Inflows In Turkey," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 10(2), pages 29-40.
    6. Canabal, Anne & White III, George O., 2008. "Entry mode research: Past and future," International Business Review, Elsevier, vol. 17(3), pages 267-284, June.
    7. Sanchez Martin, Miguel Eduardo & Escribano Frances, Gonzalo & de Arce Borda, Rafael, 2014. "How regional integration and transnational energy networks have boosted FDI in Turkey (and may cease to do so): a case study: how geo-political alliances and regional networks matter," Policy Research Working Paper Series 6970, The World Bank.
    8. Ilhan-Nas, Tulay & Okan, Tarhan & Tatoglu, Ekrem & Demirbag, Mehmet & Glaister, Keith W., 2018. "The effects of ownership concentration and institutional distance on the foreign entry ownership strategy of Turkish MNEs," Journal of Business Research, Elsevier, vol. 93(C), pages 173-183.
    9. Mehmet Demirbag & Ekrem Tatoglu & Keith W. Glaister, 2008. "Factors affecting perceptions of the choice between acquisition and greenfield entry: The case of Western FDI in an emerging market," Management International Review, Springer, vol. 48(1), pages 5-38, February.
    10. Burçak Polat, 2017. "FDI entry mode choice and ownership structure in Turkish market: A firm-level analysis," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1283762-128, January.
    11. López-Duarte, Cristina & Vidal-Suárez, Marta M., 2010. "External uncertainty and entry mode choice: Cultural distance, political risk and language diversity," International Business Review, Elsevier, vol. 19(6), pages 575-588, December.
    12. Trąpczyński, Piotr & Halaszovich, Tilo F. & Piaskowska, Dorota, 2020. "The role of perceived institutional distance in foreign ownership level decisions of new MNEs," Journal of Business Research, Elsevier, vol. 108(C), pages 435-449.
    13. Demirbag, Mehmet & Tatoglu, Ekrem & Glaister, Keith W., 2007. "Factors influencing perceptions of performance: The case of western FDI in an emerging market," International Business Review, Elsevier, vol. 16(3), pages 310-336, June.
    14. Morschett, Dirk & Schramm-Klein, Hanna & Swoboda, Bernhard, 2010. "Decades of research on market entry modes: What do we really know about external antecedents of entry mode choice?," Journal of International Management, Elsevier, vol. 16(1), pages 60-77, March.
    15. Tsang, Eric W.K., 2005. "Influences on foreign ownership level and entry mode choice in Vietnam," International Business Review, Elsevier, vol. 14(4), pages 441-463, August.

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